(Reuters) - Dollar General Corp <DG.N>
raised its bid for Family Dollar Stores Inc <FDO.N> by 2 percent to $80
per share, or $9.1 billion, and warned it may turn hostile and appeal
directly to shareholders if the new offer was rejected.

Dollar General also said it would pay a break-up fee of $500
million if deal ran foul of competition law, the reason Family
Dollar had cited for its rejection the earlier offer and opting
instead for an $8.5 billion cash-and-stock bid from Dollar Tree Inc
<DLTR.O>.

Family Dollar's shares were up almost 1 percent at $80.50 in
premarket trading, above Dollar General's cash offer, suggesting
some investors held hopes of higher offers.

"In the event you refuse to engage with us regarding our revised
proposal, we will consider taking our persuasive and superior
proposal directly to your shareholders," Dollar General Chief
Executive Rick Dreiling said in a letter to Family Dollar's board on
Tuesday.

Dollar General also said it was willing to sell up to 1,500 stores
to clear the antitrust review, up from the 700 it had said earlier.

Dollar General said last week it remained committed to acquiring
Family Dollar, after the target rejected the previous offer, saying
the deal could run foul of competition law. Instead, it opted for a
lower bid from Dollar Tree Inc <DLTR.O>.